US Gulf gasoline falls as Motiva restarts FCC unit

By Kristen Hays

HOUSTON, May 3 (Reuters) -- Gulf Coast cash gasoline differentials fell on Tuesday as the well-supplied market anticipated this week's restart of a gasoline-making unit at the nation's largest refinery, traders said.

The expected restart of a fluid catalytic cracking (FCC) unit at Motiva Enterprises' 603,000-bpd refinery in Port Arthur, Texas, overrode concern about the unplanned outage late on Monday of a crude distillation unit at ExxonMobil's 560,500-bpd plant in Baytown, Texas, the nation's second-largest.

A2 CBOB gasoline differentials slipped a penny/gal to a 17.75-cent discount to June RBOB futures, while conventional M2 gasoline fell half-a-cent/gal to a 14.75-cent discount, traders said.

Traders and brokers noted that aside from planned or unplanned work, refiners are making fuels despite a sharp drop in margins from a year ago, when crude prices were higher.

"Narrower profits means you need more volume to make up for the weaker margins," one broker said.

For example, Western Refining on Tuesday reported a 90% decline in its quarterly profit because of low margins and glutted US fuel stocks. Other refiners face similar fallout from running plants hard in late 2015 and early 2016, when gasoline margins were better.

"We started the year with higher-than-usual winter-grade inventories, leading to the volatility in the gas crack," Western Refining CEO Jeff Stevens told analysts on Tuesday.

Those margins have improved as refiners expect strong demand during the summer driving season amid low gas prices, Stevens said.

Gulf Coast gasoline stocks were 83.2 MMbbl in the week ended April 22, more than 96% of the 26-year high of 86.3 MMbbl reached in January. The US Energy Information Administration (EIA) will disclose last week's levels on Wednesday.